New rules issued by the Financial Accounting Standards Board (FASB) make three significant changes that we think can help nonprofit donors, staff, and board members understand the financial health of their organization. Since accounting jargon can be off-putting, we’ve created a new FASB resource webpage to help you to feel more comfortable understanding the changes. We’ve also recorded an “explainer” with Curt Klotz, Vice President of Finance and Chief Financial Officer at Propel Nonprofits, who gives an overview of three significant changes to the standards that became effective for fiscal years after December 2017. In a nutshell, here’s why we are hopeful that the new standards will actually smooth the way for increased understanding about a nonprofit’s financial health:

The new standards remind nonprofit staff and board members about the importance of documenting in writing how donors restrict their contributions. Clarity about how much money is restricted for specific uses or time periods will further protect donor intent and give board and staff a clearer picture of what funds are available for other uses.

The new standards will also push us all to have a “liquidity plan” for surviving cash flow droughts by requiring the disclosure of what cash is available, as well as requiring disclosure in writing of whatever plan the nonprofit has to address cash shortfalls.

Finally, the new standards change how functional expenses are reported and appear on the financial statements, enabling a clearer-eyed look at how much it really costs to advance the nonprofit’s mission. Implementing these standards should help nonprofits – including those nonprofits that do not conduct an independent audit – move towards stronger financial health. All this and more is explained on our FASB resource webpage. You can also listen to the shorter “explainer” podcast for an overview and some useful tips.

Is your organization ready for its new financial reporting and planning requirements? As they say, a stitch in time saves nine: 2018 is upon us, and the Financial Accounting Standards Board’s changes to nonprofit reporting are now applicable for calendar reporting year 2018 for many nonprofits.

Join Nonprofit Quarterly founder and Editor in Chief Ruth McCambridge, FMA founder and CEO Hilda Polanco, and FMA Lead Consultant Gina McDonald for a recap on FASB’s new liquidity disclosure for nonprofits and financial statement presentation changes, as well as a deeper dive into some “lesser discussed” aspects of FASB’s changes to nonprofit reporting, including:

Expense allocation disclosure: how much is enough?

Investment expenses: it’s more than you think….

Underwater endowments: how do we know when this applies to our nonprofit?

This article is from the Nonprofit Quarterly’s winter 2017 edition, “Advancing Critical Conversations: How to Get There from Here.”

Most of us know from experience that when important conversations about our work get stuck in avoidant and self-referential loops, it delays our ability to advance social issues and even our day-to-day practices in our organizations. This is a well-tested tenet of systems thinking, which also advises us that in their tendency to resist change, systems often throw up false signals that detour and fatally delay change efforts. This requires that we remain attentive to the content of the conversations that are helping us to advance our work, and distinguish them from those that would retard progress. There is, of course, a good deal of literature about how we can understand and implement change, but much of it will reflect the following basic structure: What we have (contrasted against) what we want—and how to get from here to there.

The Tension between What Is and What Can Be

The structure described above is the basic fractal for a change conversation. You surface the issue and explore it—warts and all—taking responsibility for your part in making it less than desirable. You imagine what an ideal state could be, and then you keep iterating the two elements: “what we want” and “how to get there from here”—the here being ever changing. In the midst of all of that, you take into account that others do not always see the same critical notions, dynamics, and assets that we work with, and it will be up to you to hold them as sacred touch points.

It is the tension between what is and what could be that gives energy to a change effort, and that energy must come from people who own and believe in a common vision because they have worked on its development together.

Thus, part of the strength of the civil sector is in our constant and curious voluntary engagement with one another around practice issues in nonprofits and philanthropy. How do we really “know” a thing well enough to ask the next right question about it? Is our vision held in common with others? And who are those others?

When conversations that are meant to advance our work get stuck, it can take years—even decades—to get them moving again. Clearly, no nonprofit can afford that down time right now, when all around us variables like policies, community demographics, funding sources, and people’s expectations of institutions are in tumultuous upheaval. Therefore, the question of how to keep change-oriented conversations moving becomes of utmost importance to this sector, charged as it is with acting in the best interests of those they purport to serve or represent.

Interrupting Conversations to Nowhere

This edition of the Nonprofit Quarterly looks at a few conversations that have been stuck and have just begun to advance again—shared leadership, collective action, and fiscal sponsorship—and at what the dynamics and processes are for initiating and exploring change within the sector. It also looks at what may be blocking the progress of the conversations, making them repetitive, circular, and nonsensical. Other obvious examples are the overhead ratio—which was known to be off base for at least three decades before it was largely shut down (over the past eighteen months or so)—and the ridiculous remonstration that nonprofits should act more like businesses, when it is pretty clear that the trend is headed in the other direction. Both of these conversations have moved along, but only after significant delays.

There are, in fact, any number of other examples of imposed or funder- and government-favored solutions that do not, in the end, work. One programmatic example is the D.A.R.E. (Drug Abuse Resistance Education) program, a much-lauded network that had police personnel all over the country working with youth to prevent drug abuse. Fortunately, this program was exhaustively studied, and it has largely—although not completely—fallen out of fashion since findings were released indicating that young people in these programs were more likely to abuse drugs than similar control groups not in the program.

But in the cases of D.A.R.E, the overhead ratio, and the push for nonprofits to act more like businesses, it took far too long for our concerns to have an effect, even at the point when most of us realized that the assertions and mandates were more harmful than helpful. Why did these concepts get stuck as givens in this sector for so long? How can we prevent such delays from happening again?

An answer lies in the concept of participatory action research (PAR). Participatory action research seeks to understand the world by trying to change it. It encourages the integration of various types and sources of knowledge; promotes observation, experimentation, and knowledge sharing; and engages those who are affected by a problem in developing dynamic analyses and approaches. Essentially, it is a political and systems-based way of understanding knowledge-development processes. Among the assumptions on which participatory research is based are two interesting precepts—namely:

Knowledge can be developed over time by a rich mix of institutions and individuals through their mutual exploration of the realities and possibilities of a situation. But for that knowledge to act successfully in the interests of those most closely affected, their knowledge must be central to the sense making. Through these conversations, people seek to comprehend the situation and determine cause–effect relationships; work to make sense of the issue, problem, or opportunity; and move the matter forward. This dialogue “provide[s] an opportunity to (a) examine the assumptions that underlie thinking and to reflect upon the implications of that thinking, (b) develop a common language among participants, and (c) create a shared context in which people learn how to talk to each other.”1

Politically and financially privileged interests can often take change-oriented conversations off course by insisting upon a redefinition of issues and possible solutions. These redefinitions are often bad fits with the ways that others understand what is in front of them, and they carry extra weight and can end up driving fields into dead ends that delay progress for long periods.

It is precisely because this sector is so resource dependent that it has a tendency to play to potential or existing funders who very often do not know exactly what they are talking about. Thus, when United Way decided to push particular management orientations in the 1980s and ’90s, many community-based organizations felt forced to go along with the unfunded mandates in order to get along with the then-important and influential local funder. Many of these management reforms have since been dropped not only among nonprofits but also among the corporations where they were born. The problem is, such funder-directed influences can hijack the time and energy needed for the more grounded learning that nonprofits need to do with others. Too often, even the intermediaries established to act as whole-field learning centers get caught up in the same funder-driven endeavors.

Even if we were to manage to run a well-conceived and well-operated nonprofit in one decade, it might appear badly conceived and operated in the next, if the organization does not continue to evolve along with the rest of the world. While some nonprofits have gotten into the habit of deconstructing and either reaffirming or altering their practices in the face of changing circumstances, others must be dragged kicking and screaming into some important facet of current reality that requires them to radically transform their practices on an immediate basis. An example of this is the state of nonprofit long-term care and home-healthcare agencies, which have relied far too long on an underpaid, marginalized, and unsustainable workforce just as the aging population begins a much-predicted expansion. There are alternative structures to those dependent on a starved and unstable workforce, but these are nowhere near developing at the scale that will be needed, leaving workers, seniors, and nonprofits highly vulnerable. Not keeping change-oriented conversations functioning in real time can have real human and social consequences.

When you look through the lens of the pace and style of the conversation, it is remarkable how much you can see in terms of what needs to be changed and why. For instance, the absurd distraction of the overhead argument obscured the need for knowledge of some other critically important interpretive tools for financial management. Such tools would have made nonprofit financial structures a lot easier for boards to manage, and at the same time might have focused funders on operating rather than program grants, and on the benefits of a healthy balance sheet. The red herring of overhead not only used up energy and focus unnecessarily but also robbed needed energy and focus from elsewhere.

But, as with anything else, there is often a nugget of truth in such distractions. The overhead question, for instance, is not completely devoid of relevance—the problem was that it consumed many other things of equal or greater relevance. Similarly, the conversation about shared leadership that you will find elsewhere in this edition has been buried under a bushel of reasonable alarms about transitioning executive leaders. A shift of the lens provides a clearer view of the whole picture, which includes an attachment to a waning heroic-leader ethos that might be replaced with a greater whole.

Nonprofits seem to be getting better at interrupting conversations to nowhere, yet we still spend a great deal of time involved in such conversations beforehand. It might be better to remember that basic construct of the fractal: know what we have, clearly envision what we want, and work that conversation until we get there. Often that will require that we question our own and each others’ assumptions and assertions.

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In pursuit of the goal of speeding up the change conversations we are having in this sector, and as our orientation arguably becomes the more dominant frame, I would like to remind readers of the great Donella Meadows’s oft-cited twelve leverage points for changing a system. Below are the top six:

The structure of information flows (who does and does not have access to information).

The rules of the system (such as incentives, punishments, constraints).

The power to add, change, evolve, or self-organize system structure.

The goals of the system.

The mindset or paradigm out of which the system—its goals, structure, rules, delays, parameters—arises.

The power to transcend paradigms.2

We can either approach conversations or communication as in service of a change that has been predefined, or we can approach them as part of a collective visioning process that resists any attempt to impose a dominant point of view—electing instead for rigor and discourse attached to collective will. These are vastly different approaches that flow from different views of how the kind of change we want to see can legitimately and with integrity occur. In the kind of complex adaptive system that is the nonprofit sector, one could make an excellent argument that habitual bowing to resource-based power—if we keep taking that subservient role—will quite naturally rob our sector of energy and influence as part and parcel of its loss of democratic principles.

Ruth is Editor in Chief of the Nonprofit Quarterly. Her background includes forty-five years of experience in nonprofits, primarily in organizations that mix grassroots community work with policy change. Beginning in the mid-1980s, Ruth spent a decade at the Boston Foundation, developing and implementing capacity building programs and advocating for grantmaking attention to constituent involvement.

A newly formed nonprofit arts group named MAGA is calling on Congress or the president to declare the eight prototypes of Donald Trump’s border wall as a national monument under the Antiquities Act of 1906.

“The eight border wall prototypes have significant cultural value and are historical land art,” the group wrote on a website where it is collecting petition signatures.

The group’s lead organizer, Christoph Büchel, believes the prototypes, which are located on land now controlled by the border control, should be memorialized to remind us of a political moment when such stuff was politically viable. (The president, of course, is no big fan of the Antiquities Act.)

Büchel wants no credit for the installation, to which he has volunteered to lead tours.

“I am an artist, but not the artist of this,” Mr. Büchel said. Instead, he said, MAGA endorses the concept that Americans, by electing Mr. Trump, allowed his obsessions to be given form that qualifies as an artistic statement. The fact that the prototypes were designed and built by six private contractors matters less, he said, than the impression that, upon completion, they constitute an unintended sculpture garden willed into existence by the president and his supporters. “This is a collective sculpture; people elected this artist,” Mr. Büchel said.

Writing for the Art and Design section of the New York Times, Michael Walker comments:

The notion that the prototypes could qualify as conceptual art might seem somewhat far-fetched. They were designed to United States Customs and Border Protection specifications, built to withstand a 30-minute assault from sledgehammers to acetylene torches, and to be difficult to scale or tunnel beneath. Aesthetic considerations are largely secondary to brute strength, but, when viewed up close, the walls collectively have the undeniable majesty of minimalist sculpture.

Tom Eccles, the executive director of the center of curatorial studies at Bard College, disagrees with the approach:

“History, and thus our landscape, is replete with terrible and terrifying structures,” Mr. Eccles said in an email [to Walker]. “Sculpture and art should speak to our better selves. Naming the Berlin Wall a Land Art project—or conceptual art—doesn’t make it such. These abhorrent things on the border are not art and never will be.”

Büchel’s not the first artist to recognize a canvas in the structures, which are largely inaccessible from the US side but which can be viewed on the Mexican side from atop dirt mounds. Activists in Tijuana have been projecting images onto them already, including one of a stick figure captioned with “¡Llégale!”—Spanish for “Come on in.”—Ruth McCambridge

Tim Delaney and David L. ThompsonOfficials of the National Council of Nonprofits

Vermont is one of several states that tried to restrict charitable giving but failed to do so because of strong nonprofit advocacy.

The destructive tsunami the new federal tax law unleashes is about to pound the nation’s nonprofits and foundations. The law that Congress passed and the president signed in the waning days of 2017 has created the most dangerous policy environment across the state, local, and federal levels that we’ve ever seen in the decades we’ve spent focusing on how governments and nonprofits interact.

That may sound like hyperbole. It is not.

Consider state policy making. In the next few months, states — operating without lead time or complete information — must react immediately to the complex federal tax law changes enacted just a couple weeks ago. States must now instantly assess the potential damage from the new law in time to make any required, yet disruptive, midyear changes to their budgets. At the same time, states must reopen their own tax codes to conform with the federal changes. Local governments will follow.

Every time tax laws are rewritten, it creates winners and losers. We anticipate attempts will be made to reconfigure state and local tax laws in ways that lead to new levies on tax-exempt entities, such as additional fees, payments in lieu of taxes on nonprofit-owned real estate, penalties on nonprofit salaries seen as overly high, and excise taxes on some endowments. What’s more, as governments at all levels are forced to cut spending, more work will fall on nonprofits to help people hurt by the spending reductions. Expect nonprofits to have to seek more money from foundations to cover those costs — think of it as a new tax on philanthropy to subsidize decisions of politicians.

With the challenges of 2018 so clear, it’s imperative that nonprofit and foundation professionals move quickly to advocate aggressively for smarter public policies at all governmental levels. Here are some of the key changes at stake.

Nonprofit Nonpartisanship vs. Politicking

Charitable, religious, and philanthropic organizations (with an assist from state charity regulators) have so far successfully blocked passage of five bills attempting to politicize their operations. Radical language in early versions of the tax bill and other proposed legislation would have weakened or eliminated the longstanding measure known as the Johnson Amendment (because it was proposed by then-Senator Lyndon Johnson) that protects charitable organizations, houses of worship, and foundations from political operatives pressuring those organizations to endorse or oppose candidates. It also insulates nonprofits from powerful donors exerting even more pressure by giving or threatening to withhold charitable contributions to organizations that endorse or oppose candidates the donors prefer.

But the threat remains very active — and likely will erupt again within the coming two weeks as Congress and the White House try to cobble together a spending bill for fiscal year 2018 before January 19 to avert a government shutdown.

President Trump, Vice President Pence, House leaders, Ralph Reed, Jerry Falwell Jr., televangelists, and the National Religious Broadcasters are among those vowing to "destroy" the Johnson Amendment — even though it has proven successful for more than 60 years. Why? We suspect it’s lust for profit and power, because the language in the House-passed tax bill, according to Congress’s nonpartisan Joint Committee on Taxation, would have encouraged partisans to divert billions of dollars of political campaign contributions to houses of worship and charitable organizations — where it would be both anonymous and (for the first time) tax-deductible.

Particularly offensive about the well-funded advocacy campaign to corrupt charitable and philanthropic organizations by dragging them down into toxic partisan politicking is: It falsely disguises a campaign-financing proposal as a "religious speech" issue. Yet not a single religious denomination has stepped forward to endorse it — compared with more than 100 denominations and major religious institutions, 4,300 religious leaders, 5,600 charitable, religious, and philanthropic organizations, and many state law-enforcement officials who strongly oppose any changes in the prohibition on partisan politics.

The fight to shield charitable and philanthropic organizations from divisive partisan involvement isn’t over, and it isn’t just a federal issue; it’s also a live threat in the states. This past year, legislators in Texas (enacted) and Michigan (pending) pushed to modify their laws to encourage or at least hinder enforcement of limits on partisan activities.

Tax Cuts = Revenue Cuts = Spending Cuts

The tax bill’s deepening of the deficit by $1.5 trillion already has been used as shallow "justification" for not fully funding the Children Health Insurance Program and cutting Medicare, Medicaid, and Social Security.

Expect things to get worse, as Bishop Frank Dewane of Florida, speaking for the U.S. Conference of Catholic Bishops about the federal tax bill, points out: "The final bill creates a large deficit that, as early as next year [2018], will be used as a basis to cut programs that help the poor and vulnerable toward stability."

States currently receive, on average, almost a third of their total revenues from the federal government. The reductions in revenue that will prompt the federal government to slash its spending will wreak havoc on many state and local budgets, further injuring the work of charitable organizations and increasing demands on foundations to fill the void.

What’s the connection between nonprofits and the fiscal health of governments?

Several, but two stand out.

First, when federal, state, and local governments cut spending, they never cut human needs; in fact, human needs increase as individuals lose services on which they depend, generating increased demands on nonprofits (and foundations). Second, America’s nonprofits earn almost a third of their entire revenue through government contracts and grants that pay for services in communities.

When governments cut spending, they reduce the resources needed to pay nonprofit contracts and grants; in turn, those nonprofits then must compete in the narrowing pool of contributions, thereby affecting all nonprofits, not just those with direct government agreements.

The states are in no condition to absorb revenue losses.

In 2017, 22 states suffered revenue shortfalls, making them unable to maintain services at existing levels, let alone with less federal funding. Here’s a partial sampling of states now in fiscal duress: The ongoing Illinois budget crisis is legendary, while New Mexico and North Dakota are mired in at least their third straight year of spending cuts. Kentucky has a $1 billion budget hole and is already cutting human services, and Iowa expects to make cuts of $45 million to $90 million by June 30. Oklahoma doesn’t even have a budget for the fiscal year that started July 2017.

Any one change to federal tax law can knock state budgets out of alignment.

Montana, for instance, a state already in financial stress, calculates it will lose $29 million in revenue this year because of federal tax changes that favor "pass-through" entities like small businesses, partnerships, and others that pass tax responsibilities onto owners, partners, and others.

How will the state raise replacement dollars? By taxing individuals, for-profit corporations, charitable organizations, or philanthropic assets? If you were a foundation or nonprofit, would you ignore this threat, go it alone, or join with other nonprofits in Montana to have more eyes and ears to learn what’s happening — and a louder collective voice?

The new federal tax law will affect every state differently. While many states expect resulting revenue shortfalls, some may be spared. But as The New York Times reported this week, leaders in California, Connecticut, New Jersey, New York, and elsewhere are considering promptly redesigning their tax codes with changes like shifting responsibility for all payroll taxes onto employers and allowing "residents to replace their state income tax payments with tax-deductible charitable contributions to their state governments."

Shrinking Charitable Gifts

As the American public just witnessed, neither facts nor logic mattered when the tax bill was before Congress.

State and local governments lost their objections to capping deductibility of state and local taxes, mortgage lenders lost their arguments about limiting the deductibility of mortgage interest, and homebuilders lost on both of those major changes. Similarly, Congress did not listen to charitable organizations and foundations about the dangerous consequences of tampering with incentives for giving.

Members of Congress may assert that they did not directly change the charitable-deduction provision in the tax code. That may be technically accurate, but it’s certainly not the whole truth. By doubling the standard deduction and lowering tax rates, Congress will be depressing charitable giving by $13 billion to $20 billion annually and eliminating 220,000 to 264,000 nonprofit jobs, according to economists. When and where those shortfalls will hit are uncertain; it might take a full year or two to grasp the consequences.

Meanwhile, expect increased threats to state charitable-giving laws. In 2011, Hawaii capped its itemized deductions to fill a budget hole, and Michigan repealed charitable tax credits to provide big tax cuts for businesses. Charitable giving declined in each state by more than $50 million annually. (Hawaii restored it in 2013 after seeing the fallout.) Since that time, at least seven additional states have tried (some more than once) to restrict charitable giving but have been defeated by strong nonprofit advocacy campaigns: Delaware, Kansas, Minnesota, North Carolina, Oklahoma, Oregon, and Vermont.

Health Care

The new tax law repeals the Affordable Care Act’s requirement that every American must have health insurance or pay a penalty. The repeal will increase health-insurance premiums in some areas by 10 percent annually, according to the Congressional Budget Office. These changes matter to nonprofits of all kinds, not just health-care groups.

After all, nonprofits are employers that may incur significant new costs to provide health insurance for their workers. And the repeal will lead to new demands for services: Of the 13 million more people projected to have no health insurance, many may be forced to choose between paying for mandatory life-saving medication and paying other bills. Yet, for example, loss of car payments in an area with no public transit may mean that some people are no longer able to get to work, leading to loss of income, then loss of housing, food, and so on. Someone losing health insurance may suddenly have lots of nonmedical needs — and turn to more and more nonprofits for assistance.

An additional major concern is the ramifications to state budgets. As the federal government shifts more burdens for health-care costs onto the states, the resulting strains will create even more havoc.

Taxing Tax-Exempt Organizations

It sounds like an oxymoron: Congress decided to tax tax-exempt organizations to pay for additional tax cuts for for-profit corporations and others. In the tax bill, Congress:

• Imposes a 1.4 percent excise tax on larger university endowment returns. That means that elected officials are ignoring the fiduciary decisions of nonprofit trustees to impose their own political will.

• Increases unrelated business income taxes, often known as UBIT, by requiring that nonprofits calculate their taxes on each trade or business they run that is not closely allied to their mission. For example, a nonprofit hospital that earns revenue by running a laundry business now may have to pay UBIT. Under current law, nonprofits aggregate profits and losses of all entities.

• Imposes a new 21 percent excise tax on nonprofits that pay compensation of $1 million or more to any of their five highest-paid employees.

For years, legislators in Massachusetts and Connecticut have sought to tax the investment returns or even the assets of college and university endowments. This past year, bills in Connecticut and Massachusetts would have denied tax-exempt status to nonprofit hospitals paying salaries that politicians regard as "high."

Legislation proposed in Montana would have deprived nonprofit hospitals of their property tax exemption for paying salaries of $250,000 or more per year. A new bill just introduced in Vermont would cap salaries at nonprofits that do $1 million or more in business with the state.

That’s not all. For years nonprofits have been battling local governments searching for any new revenue sources. The efforts to impose new taxes, fees, and payments in lieu of taxes — (known as Pilot payments) — can pop up in normal or creative forms, such as redefining what qualifies as "tax-exempt" and assessing a "bed tax" on patients of nonprofit hospitals and students at nonprofit colleges.

Time for Action

The cascading spending cuts from the federal, state, and local levels, the pending frenzied rewriting of state and local tax laws, and other threatened policy changes demand our collective action.

Every nonprofit and foundation should hold a special board meeting immediately with senior staff members to review:

Operational matters. What does your organization need to do to comply with the new federal tax law (and upcoming state and local changes), such as adjusting employee withholding?

Policy. Identify the greatest risks your organization would face if particular state and local policies are changed, as well as any new opportunities. Figure out where to get timely, trustworthy policy information in your state and to lift your organization’s voice collectively with others.

Advocacy. Because the markedly heightened threat level to missions makes it inescapable that organizations must engage in advocacy (directly or through other groups), make sure your organization understands its legal rights — and fiduciary obligation — to speak out in self-defense through legislative lobbying and engaging in other forms of advocacy.

There’s no question big change is on the way, and it has the power to do tremendous damage to nonprofits and the people they serve. Indeed, a policy tsunami is racing toward us all. If we learn nothing else from 2017, it should be the urgent need for nonprofits and foundations to take active steps to advocate for smarter public policies.

Tim Delaney is chief executive and David L. Thompson vice president for public policy at the National Council of Nonprofits.

With the replacement of temporarily and permanently restricted categories for reporting contributions and related net assets, enhanced disclosures require nonprofits to describe more about how restrictions affect the USE OF RESOURCES.

In addition, the issue of classifying costs as program vs. overhead continues to be a focus in the sector. Under the newguidelines, not only must expenses be reported by function, but nonprofits MUST DISCLOSE THE METHODOLOGY used for allocations and whether the methods are consistently applied.

This webinar will summarize the changes and explore the following questions:

Washington, DC - Tim Delaney, President and CEO of the National Council of Nonprofits, released the following statement in responseto the House and Senate passing the Tax Cuts and Jobs Act:

“The tax bill that Congress just passed on a party-line vote is a brazen insult to charitable nonprofits and the people we serve in communities every day. The bill will increase demands for nonprofit services by blowing a deeper hole in the federal deficit, which then will be usedto ‘justify’ spending cuts to programs on which the public depends. Simultaneously, it will block resources nonprofits need to address existing and growing demands for services by reducing charitable giving by billions of dollars and taxing tax-exempt organizations to pay for huge tax cuts for wealthy corporations and individuals.

“The message to charitable nonprofits is simple: The majority in Congress doesn’t care about charitable nonprofits or the vital work you do for people in local communities; you’re on your own to do so much more for so many more with so much less.

“By doubling the standard deduction without any other adjustment to the charitable deduction, the tax bill will take giving incentives away from 90 percent of Americans, robbing communities of between $13 and $20 billion every year in funds dedicated to the public good. It is hypocritical for Congress to pass a law that claims to be about creating jobs when it will destroy almost a quarter-million nonprofit jobs as a result of the decline in giving. With Congress poised to slash government programs and now curtailing donations and eliminating the jobs of hundreds of thousands of nonprofit employees who deliver services in their communities, where are people supposed to turn for help?

“All of these are the foreseeable results of a Congress that failed to look past the short-term ‘win’ of cutting taxes to recognize the very high price the public will be expected to pay. Every Representative and Senator who voted for the tax bill will look back with deep regret for this landmark mistake and the harm they caused to the very people they are supposed to represent.”

The National Council of Nonprofits (Council of Nonprofits) is a trusted resource and proven advocate for America’s charitable nonprofits. Connecting the policy dots across all levels and branches of governments, the Council of Nonprofits keeps nonprofits informed and empowered to create a positive public policy environment that best supports nonprofits in advancing their missions. Working with and through the nation’s largest network of nonprofits – with 25,000-plus organizational members - we identify emerging trends, share proven practices, and promote solutions that benefit charitable nonprofits and the communities they serve.

The Washington Post is reporting that the final GOP tax bill will not include a repeal of the Johnson Amendment, which is a provision that has been in effect since 1954 and prohibits partisan political activities by 501c3 nonprofits, including houses of worship. This protects charitable nonprofits from partisan pressures while still leaving room for nonpartisan organizing and advocacy.

As readers will remember, the House had, in its version of the tax bill, included the repeal applicable to all nonprofits and houses of worship, but the Senate did not include it, so it might have gone either way in the reconciliation process.

Still, it is worth noting that President Trump appears to remain committed to the repeal after having vowed to “totally destroy” the Johnson Amendment at last February’s National Prayer Breakfast.

Sen. Ron Wyden (D-OR), the top Democrat on the Senate Finance Committee, confirmed the provision was gone, saying, “I’m pleased to announce that Democrats successfully prevented the repeal of the Johnson Amendment from being jammed into any final Republican tax deal.” He also said that they would “continue to fight all attempts to eliminate this critical provision.”

The provision was made vulnerable to Democratic challenge by the “Byrd Rule,” which allows any provision of the tax bill that does not have to do with changes in federal deficits or surpluses, or any items the Senate Parliamentarian judges to be “extraneous matter,” to be eliminated.

Of course, nonprofit infrastructure groups have put significant effort into having the repeal eliminated from the tax bill, as is reflected in this “Community Letter in Support of Nonpartisanship” to express their strong opposition to the proposal to politicize the 501c3 community. Still, Tim Delaney of the National Council of Nonprofits warns that the fight is not over.

A similar attempt to weaken the Johnson Amendment, he points out, was slipped into the House-passed appropriations bill, and we anticipate that additional attempts will be made to slip policy riders into the next appropriations bill. The good news is that all of the work done up until now has been designed to make that task even more difficult for the other side because we’ve all educated so many lawmakers, the media, and the public along the way.

There remains much in this bill that ought to be scrapped. As Delaney writes, “We strongly urge every Representative and Senator to vote ‘No’ on this bill and start over.”—Ruth McCambridge

Nonprofit Quarterly has written about the dangers of the GOP tax reform bill moving through Congress. NPQ’s editors distributed a letter last Thursday from Tim Delaney, CEO of the National Council of Nonprofits, expressing strong opposition to both the tax changes included in the bill and the philosophical change represented by repeal of the Johnson Amendment.

Today’s news is that the repeal language written into the version of tax reform passed by the House last month was not included in the Senate version passed after midnight last Friday by a vote of 51–49. All Democrats voted against the Senate bill; Sen. Bob Corker (R-TN) was the only GOP senator to vote “no,” citing concerns about congressional Joint Committee on Taxation estimates that forecast the measure increasing the national debt by $1 trillion over ten years, after accounting for increased economic activity. The most likely scenario moving forward is that the differing House and Senate measures will have to be reconciled before the measure can be sent to the President for his signature.

The House-passed version of tax reform, officially known as H.R. 1, may be found here. The Senate took the House bill and completely rewrote it while incorporating many of the provisions in the bill. The Senate version may be found here. It’s still called H.R. 1, but it’s a very different bill.

Repeal of the Johnson Amendment has been taken up, as most readers know, by some evangelical churches and conservative political candidates. President Trump took up the issue in the 2016 campaign and, at the 2017 National Prayer Breakfast, promised to “totally destroy” the Johnson Amendment.

Named after then-US Senator Lyndon Johnson (D-TX), the amendment was adopted by the Senate on a voice vote as part of tax reform in 1954. Specifically, the amendment added the italicized clause to the end of the IRS definition of 501c3 organizations:

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

The parenthetical “or in opposition to” was added to the definition in 1987 to clarify and further emphasize the comprehensive prohibition of political campaign activity by 501c3 entities, including public charities, private foundations, and religious congregations.

Johnson Amendment repeal advocates see the issue as one of free speech, especially for church leaders who believe they should be able to speak to their congregations and communities to endorse or oppose candidates in the context of their faith and the tenets of their religion. Supporters of keeping the prohibition as it is desire to maintain the nonpartisan nature of charity, particularly in hyperpartisan times. They believe that allowing charities to choose to become politically active in campaigns will erode public support for all charities, regardless of whether a particular charity chooses to identify itself for or against a candidate. They also believe that tax deductible gifts should not be used for political campaigns, as use of the charitable deduction by donors would constitute indirect taxpayer support for the donors’ and charities’ preferred candidates. NPQ took a formal nonpartisan position opposing the repeal of the Johnson Amendment earlier this year and remains committed to opposing it, regardless of what legislation accompanies it.

Typically, when the House and Senate pass different versions of the same bill, each chamber appoints members to form a joint conference committee to negotiate changes likely to satisfy a majority of both bodies. The compromise bill would then be presented to both the House and Senate for approval before being sent to the White House.

With the razor-thin margin of passage in the Senate and the last-minute deals necessary to secure support from holdout GOP senators, however, some experts are predicting that pressure will be applied to have the House pass the Senate version without additional changes. Some bill supporters fear that the Senate may not be able to pass the bill a second time, especially if the last-minute deals aren’t included and significant House provisions deleted from the Senate version are restored.

Both nonprofits and advocates supporting or opposing the GOP tax reform package generally, and those supporting or opposing repeal of the Johnson Amendment specifically, have time to contact their senators and representatives to make their opinions known. A few points to keep in mind:

Legislators listen and respond to individual contacts from their constituents only. Don’t waste time contacting all House and Senate members unless yours is a national organization with operations in all states.

Use the telephone. Events are moving too quickly to rely on letters. Also, no one has time to read through faxes or emails trying to interpret exactly what you support or oppose.

If possible, find board members, donors, and other supporters who have a personal relationship with their senator, representative, or key staff members.

Keep your message simple.

Don’t use prepared text unless you are part of a large campaign doing the same thing. Use your own language.

Be both assertive and polite. Congressional offices are hypersensitive about threatening language and hyperbole.

For most 501c3 organizations (like NPQ), this won’t be an issue, but be mindful of the “no substantial part” (of activities) limitations on lobbying that apply to nonprofits.

Finally, watch news reports to learn whether a conference committee is being convened. If your senator or congressperson is appointed to the conference committee, it presents you with an additional opportunity to influence the shape of the final bill.

]]>Mon, 4 Dec 2017 16:57:38 GMTHow National Nonprofits Can Help Meet Local Needshttp://arizonanonprofits.org/news/news.asp?id=376873
http://arizonanonprofits.org/news/news.asp?id=376873How National Nonprofits Can Help Meet Local NeedsBy Jack Kosakowski | Nov. 27, 2017
Click Here for the original article from Forbes Nonprofit Council

“All politics is local” is a famous saying by late Speaker of the House Tip O’Neill, who believed the success or failure of elected representatives had more to do with how the constituents in their home districts viewed their job performance than what was happening nationally.

Based on my experience, I believe nonprofits also tend to be evaluated more on what happens at the local level than what is occurring nationally, even if we are talking about national nonprofits with a local presence. As the head of a national nonprofit, I’ve had my share of conversations with funders who prefer to support locally based efforts rather than national initiatives specifically for that reason. Given this, how does a national nonprofit continue to meet the needs of a community in a way that satisfies local supporters?

Like many nonprofits, Junior Achievement (JA) has what is known as a federated structure. We have more than 100 offices across the country that operate not unlike franchises. This results in a certain level of autonomy that presents both challenges and benefits to the organization. The challenges include a fairly decentralized structure that requires extra diligence when it comes to consistency, quality control and communication. At the same time, the benefits include flexibility that helps a national nonprofit be more agile in meeting the needs of local communities.

Whether or not a national nonprofit is federated, I believe there are takeaways from the model that can benefit any national organization working to address local impact. These include:

Local Ownership

The big push in recent years has been toward the creation of national nonprofits that are predominantly web-based. While this approach has certain advantages, one of which can include a lower operating cost, the model doesn’t always lend itself to a sense of ownership, especially from a local level. Promoting local ownership is critical to a national nonprofit’s success. This includes help in fostering the engagement of community leaders on local boards of directors. It’s ideal that the board has responsibility for hiring and managing the local nonprofit staff, as well. This kind of involvement helps ensure the sense of community ownership necessary for long-term success.

Responsiveness To Community Needs

Consistency and quality control are critical, but it’s important to allow some flexibility in the model so that local affiliates can make adjustments within clear guidelines to meet pressing needs in the community. At Junior Achievement, we have an R&D process that allows local offices to incorporate local buy-in for program development, as long as it fits JA’s delivery model of using volunteers to promote financial literacy, work readiness and entrepreneurship education. That said, flexibility would never extend to a radical departure from the organization mission. For example, diverting from our educational purpose to assist with disaster relief would not be encouraged.
Latitude In Brand Messaging

In this age of segment marketing and persona mapping, the “elevator pitch” – that 15-second spiel that works for everyone – is an endangered species. It’s now about who is in the elevator with you and figuring out what they want. While consistency of brand messaging is essential, it’s important to give local representatives some latitude in how they present the brand within their community. As I mentioned previously, JA focuses on financial literacy, work readiness and entrepreneurship. In some communities, financial literacy is the priority. In others, it’s work readiness or entrepreneurship. Still others, work readiness means STEM education -- or financial literacy is talked about in terms of financial capability or financial wellness. It’s important to have the national brand be broad enough to be understood but malleable enough to be honed for specific audiences.

The greatest value for a national nonprofit remaining connected with the communities it serves is that it helps ensure the organization endures. At JA, we are fortunate to be coming upon our centennial in 2019. The credit for that rests with the countless community leaders who have supported the organization in cities and towns across the country during the past century.

]]>Fri, 1 Dec 2017 21:23:57 GMTAn Open Letter to the Hundreds of Millions of Americans Who Have Worked for, Volunteered for, Donatehttp://arizonanonprofits.org/news/news.asp?id=376486
http://arizonanonprofits.org/news/news.asp?id=376486By Tim Delaney

Our tax system is a mess, we all know, so real reform would be welcome. But not like this. Congress could have opted to move the tax code in the direction of fairness. Instead, they have favored corporations and the wealthy. Congress could have acted to strengthen our communities. Instead, they are proposing to cut revenues that will lead to massive spending cuts at the federal, state, local, and nonprofit levels due to automatic cuts through sequestration.

The National Council of Nonprofits calls on you to protect the well-being of current and future generations by being America’s conscience; take three minutes as soon as you finish reading this plea to pick up the phone and call your Senators (202-224-3121) to tell them to vote NO on the “Tax Cuts and Jobs Act” bill and start over.

The Tax Cuts and Jobs Act changes personal exemptions and the standard deduction in a way that effectively denies 95 percent of taxpayers any tax incentive for giving back to their communities. The amount to which tax incentives drive donations can be disputed, but surely it will cut revenues some. Indeed, economists at the Tax Policy Center at the Urban Institute report that the tax change would reduce giving by $13 billion to $20 billion every year. The same group estimates that changes in the estate tax will reduce giving to charitable purposes by another $4 billion.

The Tax Cuts and Jobs Act will also add an estimated $1.5 trillion to the federal deficit over 10 years. We all know that rising deficit levels can and will be used to justify further program cuts, with real-world consequences. For every meal cut, shelter closed, or arts program eliminated as a result of spending cuts made in the name of deficit reduction, the tax bill would add to the unfunded mandates on charitable nonprofits and foundations to fill in the gaps. Congress will be imposing long-term suffering on our communities to secure what can, at best, be seen as short-term political gain.

The House tax bill, which passed, contains a particularly self-serving provision for politicians, a provision that would rip away the longstanding protection that all 501(c)(3) organizations—charitable nonprofits, houses of worship, and private foundations—have had from demands by candidates for public office and their political operatives to drag us into the toxic political wasteland, diverting us from our proper missions. The Senate bill does not, yet, but as the New York Times noted earlier this week, it may get slipped into the Senate version as well. The overwhelming majority of nonprofits, including religious organizations, vigorously oppose this change. If a bill that rolled back the Johnson Amendment became law, nonprofits could be pressured to endorse politicians and therefore become explicitly partisan and cast public doubt on the motives of our entire sector. We must not let this happen. This is a most radical change in the law, such that any bill should be defeated because of this fatal flaw alone.

In our work, we seek to serve people and forge stronger community bonds every day. That’s why it is so baffling and sad, frankly, to see Congress debate measures that could harm our ability to strengthen lives, build communities, expand job opportunities, and promote solutions. Both versions of the tax reform bills put politicians’ concern for passing something—anything—ahead of the best interests of the American people. It’s time for every Senator to slow down and consider the massive damage they are about to do. We all need to urge them to Vote No on this bill, and start over with legislation that prioritizes people over partisanship and communities over corporations.

Tim Delaney is President and CEO of the National Council of Nonprofits. ]]>Wed, 29 Nov 2017 20:56:49 GMT#GivingTuesday Is Here But Giving Days Lasting Much Longerhttp://arizonanonprofits.org/news/news.asp?id=376438
http://arizonanonprofits.org/news/news.asp?id=376438#GivingTuesday Is Here But Giving Days Lasting Much LongerBy Andy Segedin | Nov. 28, 2017
Click Here for the original article from The Nonprofit Times

Giving Days have become a popular tool for charities and foundations in recent years to spur giving both during select dead periods and the holiday season through efforts such as #GivingTuesday. As the days increase in popularity, with improved technical functionality and social media awareness, organizations are faced with the conundrum of whether or not to dip into the well earlier.

Dallas-based Communities Foundation of Texas incorporated a week of advanced giving for the first time during its most recent giving day this past September. The effort stemmed from the fact that the giving day landed on a Thursday and donors voiced concerns about being out of town or forgetting and area nonprofit leaders sought to host events promoting the giving day during the preceding weekend. A seven-day window was selected to give nonprofits every day of the week to work with while minimizing the risk of donor fatigue, according to Susan Swan Smith, chief giving day officer.

The campaign drew $39.4 million, an event high, with $6 million via advanced giving. The foundation handled the opportunity to give in advance as kind of a “P.S.” in its press releases and other print materials, but provided its 2,900 participating nonprofits with the option of further highlighting the option.

“We didn’t quite know what to expect,” Smith said. “That it was about 15 percent that came in advance, it clearly made a difference to some people, yet it didn’t take away from the day itself.” Foundation leadership is in the process of analyzing any subtle differences between pre-gifts and those given during the day itself.

Giving days are typically organized by local community foundations, but about three or four of the United Way’s 1,800 worldwide affiliates conduct giving days, according to Kelly Brinkley, chief operating officer of the United Way of the National Capital Area (UWNCA) in Vienna, Va. UWNCA has held its Do More 24 event for the past five years and introduced a two-week pre-giving period for the first time this year. The offering was not featured in UWNCA advertising materials and was instead offered to participating nonprofit leadership to promote as they saw fit.

“I just think that giving days and our relationship with the nonprofit community evolved and everybody recognized that we were leaving donors on the day,” Brinkley said. “It was more for convenience.”

This year’s event, held in June, drew $1.7 million, about 10 percent of which came via advanced giving. The cumulative sum was in line with what UWNCA has seen in terms of year-to-year growth in fundraising totals, which has bumped up a few hundred thousand each year. In other words, $160,000 or so is what event organizers would have expected during an early morning rush. Such donors decided, instead, to give in the preceding days.

Comic Relief Inc., organizer of Red Nose Day, has a somewhat different approach, according to CEO Janet Scardino. The organization’s entire annual fundraising effort is compressed into an eight-week span ending with Red Nose Day itself in late May. That campaign period is focused on red-nose sales at Walgreens stores, helping independent fundraisers across the country in local schools and workplaces, and driving awareness through social media. The campaign drew in $38.2 million in 2017, up from $36 million in 2016.

“We’ve found that by focusing our energy during one time of year, [it] really makes Red Nose Day special — like a national holiday,” Scardino said via an email from London. “You can create excitement and anticipation.”

The Seattle Foundation has provided two weeks of advanced giving in each of its past two Give Big events, which take place in May. Some $3.3 million of this year’s $22-million total was from advanced giving.

The foundation partners with The Seattle Times two weeks prior to Give Big with a special supplement. That supplement effectively sets off early giving and leaders of the region’s 1,700 participating nonprofits are able to promote early giving as much as they see fit. Responses from the local nonprofit community have been mixed. Some enjoy getting a jump on giving, while others are less interested and fear that advanced giving takes away from the day itself, Roske said.

Roske sees the Seattle Foundation sticking with advanced giving and spoke of the benefit of testing giving platforms during times of low volume as opposed to going zero-to-60 on the day itself. She likened the pre-giving trend to other donation enhancements such as donation “gift carts” that allow donors to pick and choose to give to multiple organization in a single transaction akin to online shopping. The point of giving days, Roske said, is to elevate and organization’s existing strategy with such tools.

“I think that donor fatigue is an issue facing the nonprofit community and giving days in general,” Roske said. “The addition of early giving, I don’t believe, contributes to the overall challenge of donor fatigue.”

Organizations, particularly community foundations, have traditionally used giving days to raise the bar for area donors, said Brad Ward, director of community philanthropy for the Council on Foundations. The average gift for giving days tends to be larger as donors are giving outside their normal decision making, making a little extra generosity more feasible.

Giving days have grown in popularity during the past five years as organizations seek to expand organizational culture, engage local philanthropists, and promote civic pride. The increased popularity of online giving has helped fuel donor comfort with such events, Ward said. He sees advanced giving as a means for nonprofits to play to existing strengths by giving reliable donors who would participate anyway more time in which to do so all while providing more time to coordinate a successful effort.

“Any time you give donors flexibility to control their giving and the ability to essentially mobilize other gifts — you open up Hour 1 of the giving day with money — it’s very inspiring. It’s very motivating,” he said.

The Pittsburgh Foundation is one organization out of the business of organizing giving days, according to Kelly Uranker, director of the foundation’s Center for Philanthropy. The foundation’s first giving day was in 2009, a response to the 2008 economic crisis. Area nonprofits were concerned by a lack of individual giving and Pittsburgh is a foundation-focused community, Uranker said. The inaugural giving day was an opportunity to create an incentive around giving while also giving local nonprofits the chance to work with then-unfamiliar online donation platforms.

At its peak, the giving day raised about $8 million. A pot of $750,000 in matching funds was a consistent carrot for organizations and matching dollars were prorated so that all participants could benefit. The foundation stopped organizing the giving day after 2016, choosing instead now to provide consulting expertise for Pittsburgh Magazine’s efforts, which will tie into #GivingTuesday.

Uranker said that the foundation was a victim of its own success. Each year, 40 or so new nonprofits would sign on to participate, but the matching funds remained static. Matching amounts went from 22 cents on the dollar to 14 to 11. Those decreases were hard on public morale. In 2016, nonprofits were encouraged to work toward their own match pool, raising $2.2 million.

Understanding the timeline of the giving day on the outset is something Uranker would recommend to foundation or nonprofit leaders before they take the plunge. “It works well in different communities,” Uranker said. “It’s an arch. We’re all arching at the same speed.”

Yesterday, San Francisco District Judge William H. Orrick made permanent the temporary injunction he issued in the matter of President Trump’s January executive order that would have withheld federal funds from sanctuary cities.

The opinion backing the permanent injunction is comprehensive in its rejection of the administration position, noting that to withhold federal funds to cities for their decision to become sanctuary cities violates the US Constitution’s Fifth and Tenth Amendments as well as its “separation of powers” doctrine.

“The Constitution vests the spending powers in Congress, not the President, so the Executive Order cannot constitutionally place new conditions on federal funds. Further, the Tenth Amendment requires that conditions on federal funds be unambiguous and timely made; that they bear some relation to the funds at issue; and that they not be unduly coercive,” the judge wrote. “Federal funding that bears no meaningful relationship to immigration enforcement cannot be threatened merely because a jurisdiction chooses an immigration enforcement strategy of which the President disapproves.”

Orrick also used statements made by president and others in the administration to discern the true intent and purpose behind the order.

“And if there was doubt about the scope of the Executive Order, the President and Attorney General erased it with their public comments,” Orrick wrote. “The President has called it ‘a weapon’ to use against jurisdictions that disagree with his preferred policies of immigration enforcement, and his press secretary reiterated that the President intends to ensure that ‘counties and other institutions that remain sanctuary cities don’t get federal government funding in compliance with the executive order.’”

The US Department of Justice has not yet disclosed whether it will file an appeal.—Ruth McCambridge

Last week, New Mexico Community Capital (NMCC) announced that a $1.2 million grant from the W.K. Kellogg Foundation will allow it to expand workforce training for New Mexico’s Native American population, which has the highest poverty rate in the state, at 34.6 percent.

The grant program is an expansion on NMCC’s Native Entrepreneur in Residence (NEIR) program, which started in 2014. Peter Holter, managing director of entrepreneurial services with NMCC, said that “24 graduates from that program have created 84 new jobs and $7.36 million in new gross revenues.” However, he added, “Many struggle to prepare competitive business plans and funding applications. They lack access to consistent business expertise, free support services, and peer networks.” The added funding will help NMCC address that problem.

NEIR began because, as the Kauffman Foundation pointed out, Native entrepreneurs rarely have access to the same kinds of capital and investment that others do. Emily Fetsch at Kauffman explained that “Because Native Americans, especially those residing on reservations, tend to be geographically isolated, they are unlikely to have connections to potential equity investors.” A 2010 study from the Minority Business Development Agency at the US Chamber of Commerce reported,

Minority-owned businesses [sic] are found to pay higher interest rates on loans. They are also more likely to be denied credit, and are less likely to apply for loans because they fear their applications will be denied. Further, minority-owned firms are found to have less than half the average amount of recent equity investments and loans than non-minority firms even among firms with $500,000 or more in annual gross receipts, and also invest substantially less capital at startup and in the first few years of existence than non-minority firms.

Because reservation land is often held “in trust” for American Indian nations by the federal government, American Indians don’t technically hold title to trust lands. This keeps the land from being sold to outside investors, but makes it difficult to finance business development, as land that cannot be sold also cannot be used as collateral for loans. As Naomi Schaefer Riley of the Atlanticexplained,

The goal of this policy was originally to keep Indians contained to certain lands. Now, it has shifted to preserving these lands for indigenous peoples. But the effect is the same… This prevents American Indians from reaping numerous benefits.

[…]

Indians have long suffered from what the Nobel Prize–winning economist Hernando de Soto has called “dead capital.” They may possess a certain amount of land on paper, but they can’t put it to use by selling it, buying more to take advantage of economies of scale, or borrowing against it.

Based on research of similar past endeavors, the Kellogg grant is likely to be an excellent philanthropic investment. The same report from the MBDA noted, “Between 1997 and 2002, minority-owned [sic] firms far outpaced non-minority firms in terms of growth in number of businesses total gross receipts, number of employees, and total annual payroll.” A 2014 study in the Research in Business and Economics Journal found that “small businesses owned by Native Americans to employ somewhat more employees than businesses owned by small business owners representing other racial classifications,” meaning that a successful small business can lift multiple families out of poverty.

In October, NPQreported on a program run by the Orton Family Foundation that found success by reaching out to communities where they were living, determining what assets already existed, and building engagement off that knowledge. It seems that NMCC is poised to work the same way, identifying needs they can fill and training people to build independent wealth. As President Trump’s administration threatens to cut programs that support Native populations, we are glad to see some nonprofits stepping into the void.—Erin Rubin

A controlled burn is good for a forest. It clears out dry brush, reduces fire hazard, and encourages a diverse, healthy ecosystem for animals and trees. In contrast, a wildfire – well, ask the people in the wine country counties: a wildfire is an unpredictable, raging force that can take lives, devastate homes and jobs, and leave land at more risk for erosion and flooding.

Our analysis of the proposed tax bill in Congress is that it's a wildfire coming straight at California – particularly California's middle class and disadvantaged communities. It must be stopped before it ravages our state.CalNonprofits’ recent survey about nonprofits adapting under Trump administration revealed that nonprofits are more worried about their communities and constituents than earlier this year. Both the House and Senate tax plans, which are scheduled to be taken up in the coming days, should make them even more worried.

The House and Senate tax plans benefit wealthy individuals and corporations at the expense of middle- and low-income families

While promising to streamline the tax code and reduce taxes for the middle class, both versions would shift resources away from low- and moderate-income people while giving major tax breaks to high-income people and wealthy corporations – dramatically increasing inequality in our communitiesSimilarly, even though both bills keep the charitable deduction, they move the deduction to where only wealthy donors would benefit from it. In fact, these proposals would restrict those who itemize deductions to only the wealthiest 5% of taxpayers, making it harder for 95% of taxpayers to make donations.

Bigger deficits mean deeper cuts to federal programs

The proposed tax plans would reduce tax dollars by the trillions, and potentially lead to dramatic increases in the deficit. That would put pressure on Congress to cut programs that middle- and low-income families rely on, from highway repair, Medicaid, and housing to public education, medical research, and other services.For nonprofit organizations, cuts in federal programs mean cuts in contracts to nonprofits in human services, health, housing, the arts, and the environment. With one in every sixteen California jobs at a nonprofit, these cuts could translate to layoffs at nonprofits, fewer services to communities, and thousands more unemployed. California would also be disproportionately hurt by the tax bill. This New York Times article even quotes San Diego Republican Darrell Issa: “I cannot endorse changes that may make the tremendous burden felt by California taxpayers even worse,” he said. “Tax reform should lower taxes for all taxpayers — regardless of where they live.”

Nonprofit nonpartisanship is being attacked under the guise of the House tax plan

The House Ways & Means Committee made a last-minute change to its tax bill that would weaken Johnson Amendment protections for all 501(c)(3) organizations by allowing them to engage in partisan electioneering.In effect, nonprofits – including churches and houses of worship – would be vulnerable to becoming pass-throughs for dark money by donors pressuring us to support particular candidates. People who support the work of nonprofits rely on us to use their donations to help our communities, not engage in electioneering. The nonpartisan Joint Committee on Taxation (JCT) estimates that the provision would cost the federal government $2.1 billion over just six years because donors would divert their currently nondeductible political campaign donations to churches and nonprofits in order to claim charitable tax deductions.

Take a closer look

CalNonprofits policy framework states, “We support government budget and fiscal policies that provide sufficient resources to equitably and adequately meet the needs of Californians.” The House and Senate tax proposals don’t meet this standard. While the bill has been in the House Ways & Means Committee, we have contacted our members in the districts of the four California House members who sit on that committee, encouraging them to call their Representatives and amend the bill to make it fairer.As the bill moves to the full House and Senate, every one of California's 55 members of Congress holds a crucial vote. We hope our elected officials will reconsider their plans, and pass a tax plan that helps, not harms, the general welfare of Californians.

By Jan Masaoka

]]>Thu, 16 Nov 2017 20:31:51 GMTThe Good (?), the Bad, and the God-awful: Nonprofit Bottom Lines on the House Tax Bill http://arizonanonprofits.org/news/news.asp?id=373597
http://arizonanonprofits.org/news/news.asp?id=373597

By David L. Thompson

The House tax bill released last week promises “unprecedented simplicity,” “fairer taxes,” and “the beginning of the end of our nation’s broken tax code.” Simpler, fairer, and unbroken are, of course, in the eye of the beholder. Certainly, reducing the paperwork of 90 percent of taxpayers so they can merely fill out a postcard tax return is simpler, but at what cost to society or to the ability of charitable nonprofits to advance their missions in communities? A judgment on fairness depends on how someone’s finances, quality of life, and well-being are affected. And while the system is clearly broken, as well as inconsistent, it appears that the Tax Cuts & Jobs Act is just another collection of special-interest giveaways rather than a real fix for everyday Americans.

To briefly recap, the Tax Cuts & Jobs Act would lower tax rates for many individuals, repeal numerous taxes like the alternative minimum tax and the estate tax, and significantly reduce taxes paid by corporations and partnerships. To pay for these and more tax cuts, the entire Internal Revenue Code was picked up and shaken so that only the provisions with the strongest lobbying power remained stuck to the Code unchanged. Yet it comes up $1.5 trillion short of balance—foreshadowing enormous spending cuts for at least the next decade.

A careful review from the nonprofit perspective finds that the proposed tax-law changes range from bad to awful. This article parses various details to help readers determine into which of these categories the changes belong, applying the twin nonprofit bottom lines. That is, the article is written from the dual perspectives of charitable nonprofits: 1) mission-driven organizations that care as much or more about the people and communities they serve and the causes they advance as they do about 2) themselves as entities with employees and bills to pay. Stated another way, for charitable nonprofits it is always (or better be) about the mission first and organization second.

Before deciding whether to support or oppose the bill, people should slow down to look at the facts. Unfortunately, that is at odds with the fact that there is little time to use your voice because this bill is moving at lightning speed. The House Ways and Means Committee will take action on the bill beginning today through this week, and the full House is expected to vote up or down on it next week. The Senate is also expected to come out with its competing tax reform plan in the next two weeks. Here’s what’s at stake.

The Existential Threat

While a few may believe that a passion for partisan politics is (and should be) a way of life, the vast majority of the charitable nonprofit community, including houses of worship, and foundations vehemently oppose any changes to the Johnson Amendment, the decades-old law that has proven successful in protecting 501(c)(3) organizations from demands from candidates for public office and donors for political endorsements and campaign contributions. To most of us, nonpartisanship is the only way charitable organizations can provide a safe place for bringing all beliefs to advance their missions of solving problems in their communities. Nonpartisanship is essential to charitable nonprofit existence.

The House tax bill ignores the strongly articulated views of tens of thousands of people and organizations by including a provision (§ 5201) that would create a gaping loophole in the absolute ban on nonprofit politicking by enabling churches and integrated auxiliary organizations to endorse candidates for public office when communicating “in the ordinary course of the organization’s regular and customary activities,” such as speaking on weekly or daily religious broadcasts, and when spending “not more than de minimis incremental expenses,” an undefined term.

On the day the legislation was introduced, the National Council of Nonprofits stated, “The constitutionally suspect change proposed in the House bill would destroy the safe space where people can currently come together, ignoring party labels, to worship and solve community problems.” This isn’t hyperbole, but reasoning grounded in experience. If enacted, the provision would politicize houses of worship and related charitable organizations, plunging them into the caustic partisanship that bedevils our country. Notably, the proposal would encourage creation of sham religious organizations, divert contributions from other nonprofits to fund partisan churches, and bring discredit to the broad charitable nonprofit community.

The Joint Committee on Taxation (JCT) appears to agree with this assessment. It estimates that the Johnson Amendment exemption in the tax bill would cost the US Treasury $2.1 billion between now and 2027, or about $210 million per year. Since the hit to the Treasury ($210 million/year) is only a third or a quarter of the actual dollars donated, that means the JCT analysts assume claims of new itemized charitable deductions of between $600 million to $800 million every year for ten years. This adds up to more than a billion dollars in new revenue to partisan churches per two-year election cycle so they can engage in election-related activities. Likely, this would include diversion of monies currently donated to political action committees (that must be disclosed by law) and social welfare organizations (undisclosed) but which don’t provide donors with a charitable tax deduction. The estimate presumably doesn’t include shifts in funding away from nonpartisan charitable organizations that are focused on their missions to instead fund newly politicized churches that reap financial reward for endorsing candidates and attracting partisan donors who previously just supported good works in their communities.

A preacher in Tulsa, Oklahoma said it well: “When you combine religion and politics, you get politics.” Another commentator said it even better: “Mixing religion and politics is like mixing ice cream and manure. It doesn’t do much to the manure but it sure does ruin the ice cream.”

Nonprofit Bottom Lines: Dollars diverted from public good to political ambitions; expansion of corruption in the 501(c)(3) space; exploitation of “sanctuaries” for political gain; public faith undermined. There’s not enough lipstick to gussy up this pig. The tax reform bill should be defeated based on this one provision alone.

Giving Incentives, Deductions, and More

For good or for bad, the charitable tax deduction is always the big Kahuna for many nonprofits. The House tax reform bill would nearly double the standard deduction from $6,300 to $12,000/individual filer and from $12,600 to $24,000/couple. Single filers with at least one qualifying child could claim a standard deduction of $18,000. These amounts would be adjusted for inflation. Experts predict that after this change is implemented only five percent of taxpayers will itemize their deductions, meaning that 95 percent of taxpayers would receive no tax incentive for donating to the work of charitable nonprofits. Una Osili of the Lilly Family School of Philanthropy at Indiana University estimates that change would lead to a reduction of up to $13 billion a year in charitable giving, and 28 million fewer Americans itemizing their returns, according to a recent interview on NPR. She says she doesn’t expect these people would stop giving, only that they’re likely to give less. Not everyone agrees with these estimates, and the hit would not be felt equally among all nonprofits. Narrowing the charitable deduction so it applies only to the most wealthy will likely encourage an even more uneven giving landscape, resulting in a further imbalance between large gifts to large institutions, such as higher education, and the often smaller gifts received by community-based organizations that benefit everyday people, every day. Additionally, as you can read below, many in the sector have been advocating for a universal tax deduction to support giving from all income strata.

Nonprofit Bottom Lines: The bill could arguably reduce charitable giving by up to $130 billion over the next decade. It also does nothing to provide incentives for donations from lower-level donors.

So What’s Left of Itemized Deductions?

The Tax Cuts & Jobs Act calls for eliminating itemized deductions for state and local income taxes, medical expenses, and casualty losses. The only items left to deduct are the following categories of costs, but only if, combined, they exceed the proposed standard deduction of $12,000/individual and $24,000/couple:

Mortgage interest would be preserved for existing mortgages, but limited to loans of $500,000 or less for future home purchases. This is a reduction in the cap from $1 million today. The Realtors and Home Builders associations have come out swinging in opposition.

Property taxes could still be deducted, but only up to a new cap of $10,000. Note: If someone has a loan on their home, the bulk of the $12,000 annual standard deduction would be consumed largely by their mortgage interest and property taxes, creating very little, if any, incentive to make charitable contributions.

Charitable contributions in general, and proposed changes: In addition to continuing “the deduction for charitable contributions so people can continue to donate to their local church, charity, or community organization,” as the Republican news release asserts, the legislation proposes a few positive changes. It would raise the limit of cash donations that individuals can deduct from 50 percent of adjusted gross income (AGI) to 60 percent of AGI. It also would eliminate the “Pease limitation” on itemized deductions that imposes deduction limits for high-income individuals and couples. These changes would only benefit the small percentage of taxpayers who would still itemize their deductions.

The bill would also address a longstanding inequity in the law by adjusting the volunteer mileage rate for inflation, as long has been done for paid employees in all sectors. This rate has been fixed at 14 cents per mile for many years and does not reflect adequate respect for the service of volunteers who, for example, deliver meals and provide rides to the doctor for elderly persons.

In another element of legislative cleanup, the bill would repeal a law that exempts nonprofit donors from having a written acknowledgment from a nonprofit if the nonprofit provides the donor’s social security number and other information to the IRS in its tax filings. Relying on this provision of the tax code, the IRS in 2015 sought to create a new gift substantiation rule that encouraged nonprofits to collect donor social security numbers, a clear breach of identity theft protocols of every government agency. The 2015 proposal was withdrawn quickly after the nonprofit community forcefully pushed back against it.

No Universal Deduction included…yet: The bill does not include a new deduction sought by the nonprofit community—a universal or non-itemizer deduction that would enable all Americans, not just five percent of taxpayers, to receive a tax incentive for giving back to their communities through charitable donations. Language that many nonprofit advocates are supporting is found in the Universal Charitable Giving Act (H.R. 3988), which would provide a deduction with a cap of up to one-third of the standard deduction ($4,000/individual; $8,000/couple) for taxpayers who do not itemize.

Nonprofit Bottom Lines: Nearly doubling the standard deduction greatly narrows the pool of those who would be eligible for a tax incentive to give more to their communities. The additional limits on itemized deductions will only complicate the efforts of charitable nonprofits to generate the revenues they need to advance their missions.

Reduces, Repeals the Estate Tax

Long on the Republican chopping block, the estate tax takes two hits in the House tax bill. Immediately, the bill would double the exemption from the estate tax (to about $11 million for individuals and about $22 million for couples) for the first six years. It would then repeal the tax in 2023. This is significant for nonprofits because charitable donations and bequests are exempt from the estate tax, creating an incentive for wealthier taxpayers to give rather than have their estates taxed on that money. A higher exemption will mean that fewer estates will make large bequests to nonprofits (or create new foundations) for tax purposes. More importantly to many, the elimination of the estate tax would reduce federal revenues by $172.2 billion over 2018–2027, ultimately forcing deeper spending cuts.

Taxing Tax-Exempts to Pay for Tax Cuts

By various estimates, the House legislation would cut taxes by $4 trillion to $5 trillion over a ten-year period, but only increases the federal deficit over a decade by $1.5 trillion, give or take a few billion dollars. This supposedly is done by repealing loopholes, “eliminating costly deductions that drive up taxes,” and, in numerous ways, targeting tax-exempt entities with a host of revenue raisers.

Nonprofit college and university endowments (§ 5103): The bill would impose a new excise tax of 1.4 percent on net investment income of nonprofit colleges and universities with assets (not counting those used directly in carrying out the institution’s educational purposes) valued at more than $100,000 per full-time student. The proposal that reportedly would apply to more than 150 institutions, would raise $3 billion.

It might be tempting for other nonprofits to lay low and consider such a tax to be just a problem for rich colleges and universities. Recognizing that the congressional quest for new revenues is a permanent journey, the breach of nonprofit independence should be taken seriously, and opposed, by all. Such an action is like Congress telling Boeing, Citibank, and IBM—or small businesses—how to spend their money. Corporate America would never allow governments to infringe on their independence like this, nor should we allow it to happen to nonprofits.

This proposal is just the first step on a dangerous slippery slope, a precedent potentially without end. Foundations, for example, rely on earnings from investment funds to fulfill their obligations to provide grants for charitable works. We must remind lawmakers that well-managed nonprofits maintain reserves so they can adjust to changes or seize new opportunities. Certainly, alumni and individuals can pressure colleges and universities to provide more scholarship support and invest more to benefit their local communities. But boards of organizations, not politicians, must remain the decision makers when it comes to charitable and philanthropic assets.

Foundation excise tax streamlined (§ 5101): The newly proposed private college endowment tax is modeled on the way the House bill would streamline the existing excise tax on foundation investment income. For years, private foundations have complained that the existing two-tier excise tax—based on pay-out rates and rolling averages—frustrates funding in times of greatest need and injects complexity where it is not needed. The House bill largely agrees with the positions stated taken by foundations by converting the excise tax into a single rate of 1.4 percent. In recent years, foundations had lobbied for a tax rate of one-percent, so the level proposed in the House bill is a good step in the right direction and a partial disappointment. It is also a moneymaker for the Treasury, taking from tax-exempt foundations a projected total of about $500 million over the next decade.

Nonprofit executive compensation (§ 3803): The legislation would raise an estimated $3.6 billion to pay for other tax cuts by imposing a 20-percent excise tax on high salaries paid by tax-exempt organizations. The new tax would be assessed on compensation in excess of $1 million paid to any of the tax-exempt organization’s five highest paid employees for the tax year. This provision applies to charitable nonprofits and foundations, and all 501(c) organizations such as trade associations and unions. A similar tax is applied elsewhere in the House bill to for-profit employers.

Expanding Unrelated Business Income Tax (UBIT): In the UBIT area, many feel the bill could have been much worse—and might be still, as the House and Senate look for more revenue to fund more tax cuts. The House bill proposes several changes to UBIT liability. The exemption in current UBIT law for research would be narrowed to apply only to income derived from research that is made freely available to the public. This limitation is projected to raise $700 million. Also, the House bill would impose UBIT liability on tax-exempt entities for the values of providing their employees with fringe benefits like transportation (such as parking and mass transit), and on-premises gyms and other athletic facilities. The tax, which is similar to the bill’s proposed treatment of for-profit employers, treats the funds used to pay for such benefits as unrelated business taxable income. Notably, nonprofits would pay a lower tax rate on UBIT going forward, since the House plan would lower the maximum corporate income tax rate from 35 percent to 20 percent. (§§ 3308, 5001–5002)

For several years, members of Congress have discussed altering the definition of unrelated business income for nonprofits. One set of proposals offered by former Representative Dave Camp, then-Chairman of the Ways and Means Committee, would have altered how UBIT was calculated and imposed new liabilities. The Camp Draftremains a smorgasbord of tax reform ideas that remain in play, even this late in the process.

Nonprofit Bottom Lines: Keeping in mind that many of these “revenue raisers” are included in the bill to help pay for additional and bigger corporate and other tax cuts, nonprofit opposition to new taxes on tax-exempt entities isn’t merely squealing when gigged; it’s a recognition of the old adage: The number one job of a politician is to spend other people’s money. Here, Congress is threatening to invade the board rooms of nonprofits (seizing endowment earnings) and human resources departments (taxes on compensation and restricting benefits). These taxes trample nonprofit independence, something that all tax-exempt organizations should defend against, not just those that are directly affected.

Additional Provisions Eroding the Future

Ways and Means Committee Chairman Brady claims that the bill would streamline “higher education benefits to help families save for and better afford college tuition and other education expenses.” Education groups think differently. “Taken in its entirety, the House tax reform proposal released today would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” according to Ted Mitchell, president of the American Council on Education. The bill would do this by ending student loan interest rate deductions, restructuring the American Opportunity Tax Credit, eliminating tax benefits for students who take more than five years to graduate, and part-time and graduate students, according to Inside Higher Education. Further, the legislation would eliminate a section of the tax code that allows employees of nonprofit universities and colleges to exclude from taxable income qualified undergraduate tuition reductions they, or their dependents, receive from their employer.

Affording Housing

The Ways and Means Committee took pains to point out that their bill “retains the low-income housing tax credit” in current lawthat “encourages businesses to invest in affordable housing so families, individuals, and seniors can find a safe and comfortable place to call home.” In fact, the reduction in the corporate tax rate could have an impact in how much investment goes into the Low-Income Housing Tax Credit (LIHTC). Further, the bill would eliminate the new markets tax credit, which is an important source of low-income housing for nonprofits like Habitat for Humanity.

Nonprofit Bottom Lines: It’s not enough to do good work in communities and promote positive policies that improve lives; tax reform shows that when big money is spent by big money interests, merit has little meaning in the face of budget accounting ledgers. By imposing more burdens on students and low-income people needing affordable housing—while cutting corporate tax rates so much—the tax bill expands inequities and deprives many individuals of a better future, which will come back to harm society as a whole while imposing additional burdens on charitable nonprofits.

Conclusion

The cost of tax reform is too high if children cannot get the food, shelter, education, and support they need. The price is too great if citizens can no longer find a safe haven in charitable nonprofits like houses of worship from the caustic partisan politics ripping our country apart. And we as a nation cannot afford tax reform if it forces our government to make false spending choices between the domestic needs of our people and our common defense.

Fixes are readily available to overcome these and many other fatal flaws in the tax reform bill released today, but it will require reasonable people in Congress agreeing to agree for a change.

David L. Thompson is Vice President of Public Policy for the National Council of Nonprofits and former senior staffer for the Senate Health, Education, Labor & Pensions Committee.

]]>Wed, 8 Nov 2017 16:49:52 GMTNonprofits, Nation Cannot Afford This Proposed Tax Reform Planhttp://arizonanonprofits.org/news/news.asp?id=372862
http://arizonanonprofits.org/news/news.asp?id=372862Washington, DC - Tim Delaney, President and CEO of the National Council of Nonprofits, released the following statement in response to the Tax Cuts and Jobs Act tax reform legislation made public today by the House Ways and Means Committee:

“The cost of tax reform is too high if children cannot get the food, shelter, and support they need. The price is too great if citizens can no longer find a safe haven in charitable nonprofits like houses of worship from the caustic partisan politics ripping our country apart. And we as a nation cannot afford tax reform if it forces our government to make false choices between the domestic needs of our people and our common defense. Fixes are readily available to overcome these and many other fatal flaws in the tax reform bill released today, but it will require reasonable people in Congress agreeing to agree for a change.

“The tax reform bill unveiled today by the House Ways and Means Committee would tragically undermine the ability of certain charitable nonprofits to serve our country’s people and communities. One proposed provision would drag houses of worship down into the swamp of partisan politics by weakening the longstanding law (the Johnson Amendment from 1954) that prevents political operatives from soliciting nonprofits and houses of worship for endorsements. Another provision would diminish the tax incentive to contribute to the work of charitable nonprofits to all but five percent of Americans. Overall, the legislation would cut revenues too deeply, ignoring our nation’s true and necessary expenses and ultimately hurting people.

“Any changes to the Johnson Amendment present an existential threat to the work of charitable nonprofits, houses of worship, and foundations. We cannot effectively serve our communities if we are invaded by the divisive partisan politics that are bedeviling our country. The constitutionally suspect change proposed in the House bill would destroy the safe space where people can currently come together, ignoring party labels, to worship and solve community problems. Nonprofits don’t want this change. Houses of worship and faith leaders don’t want this change. Foundations don’t want this change. Law enforcement doesn’t want this change. The Johnson Amendment has served our nation well since President Eisenhower signed it into law. Don’t mess with something that isn’t broken.

“Congress must not make it even harder for charitable nonprofits to do their work for others. Since the Great Recession started, governments at all levels have been cutting their budgets and pulling back from providing services to people in their communities, expecting nonprofits and foundations to fill the gaps. Nonprofits have been asked to do so much more for so many more people for much less money for far too long. Even though the talking points on the bill claim to keep the charitable deduction intact, the truth is that doubling the standard deduction puts this important incentive to give out of reach for 95 percent of Americans. To hold nonprofits harmless, instead of a policy that restricts charitable giving incentives to only five percent of taxpayers, Congress should open the incentives up to encourage all Americans to support their local communities through a universal deduction.

“Like the air we breathe, nonpartisanship is essential to the survivability of charitable nonprofits. Likewise, charitable contributions are the lifeblood of organizations that serve every American every day. Our message to Congress on tax reform is simple and elementary: Don’t take away our oxygen or our lifeblood. Retain the Johnson Amendment unchanged and ensure that all Americans have a tax incentive for giving back to vital work in communities.”

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About the National Council of Nonprofits

The National Council of Nonprofits (Council of Nonprofits) is a trusted resource and proven advocate for America’s charitable nonprofits. Connecting the policy dots across all levels and branches of governments, the Council of Nonprofits keeps nonprofits informed and empowered to create a positive public policy environment that best supports nonprofits in advancing their missions. Working with and through the nation’s largest network of nonprofits – with 25,000-plus organizational members - we identify emerging trends, share proven practices, and promote solutions that benefit charitable nonprofits and the communities they serve. Learn more at www.councilofnonprofits.org.

This month marks the 100th birthday of the federal tax deduction for charitable giving. That anniversary should be a day of celebration for all that this incentive to give has done for the American people. The underlying policy – Congress shouldn’t tax money that people give away to help communities – remains as valid now as it was in 1917 shortly after Congress began taxing income. But this celebration is marred by the damage proposed in the tax reform framework that the White House and congressional leaders released last month.

Like a magician at a birthday party, their tax reform framework uses distraction to achieve a sleight of hand trick. The magician’s left hand swirls a colorful scarf to misdirect attention to the framework’s boast that it “retains” the tax incentive for charitable deductions. Meanwhile, the magician’s right hand stealthily makes billions of dollars in charitable donations disappear by effectively eliminating the charitable giving incentive for all but the wealthiest.

Right now, about 30 percent of taxpayers itemize their deductions and thus can apply the charitable deduction incentive. But in the name of simplification, the framework calls for doubling the standard deduction, which experts estimate would radically shrink the percentage of taxpayers who itemize down to only 5 percent. Ninety-five percent of us would have no tax incentive for donating to the good works we support; the vast majority of us would be taxed on the money we give away – for everything from arts to zoos, including houses of worship, disaster relief, human services, education, health care, veterans and more.

Certainly, many people will continue to support the missions of nonprofits they care about. But there is substantial evidence that the charitable deduction tax incentive provides a key motivation for giving more. Just look at the percentage of charitable donations that occur each year on Dec. 30 and 31. According to Network for Good, 9 percent of giving for the entire year happens on those two days. Further, the Lilly Family School of Philanthropy at Indiana University conducted a study calculating that a proposal like the one found in the tax reform framework would result in a reduction in giving to work in communities of more than $13 billion annually. Other experts peg the loss of giving to good works to be even higher.

Without a robust charitable giving tax incentive, many people in communities across America will suffer because nonprofits will not have the resources necessary to serve them. That statement is neither conjecture nor hyperbole. Recent tax policy experiments in the states demonstrate that giving back to communities is highly responsive to changes in tax incentives. In 2011, Michigan repealed state tax credits for charitable purposes to pay for business tax cuts and charitable giving dropped disproportionately. That same year, Hawai’i capped itemized deductions, including charitable donations, and giving declined by an estimated $60 million per year until the cap on charitable donations was lifted two years later.

The charitable deduction has served our nation extremely well for a full century. Rather than covertly converting a proper birthday celebration into an involuntary retirement party, Congress should reject the notion of restricting the charitable giving incentive to just the few remaining itemizers. Instead, Congress needs to make it universally available to all Americans through a non-itemizer deduction for charitable contributions. There are several ways that such a deduction could be crafted, including one proposed in H.R. 3988, the Universal Charitable Giving Act of 2017, introduced recently by Rep. Mark Walker (R-N.C.). However crafted, extending the charitable deduction to all taxpayers — regardless of whether they itemize or take the standard deduction — would help overcome the significant decrease in charitable giving and community resources that most economists predict will otherwise occur.

In addition to rewarding charitable spirit with a universal deduction that treats everyone fairly and equally, an All-American charitable deduction would do what the tax reform framework claims to seek: accomplishing “important goals that strengthen civil society, as opposed to dependence on government.”

Tim Delaney is president and CEO of the National Council of Nonprofits, the nation’s largest network of charitable nonprofits.

It’s less than a month since Hurricane Maria hit Puerto Rico, but Puerto Ricans are already adapting and doing all they can to take care of each other. Adaptation has been hard, and has included making do with substandard or nonexistent basics like food, water, and power; moving stateside; or sending children away to attend school.

One of the many disturbing realities: CNNreported yesterday that people are drinking water from the Dorado Groundwater Contamination Site, a Superfund site that the EPA designated as contaminated with industrial chemicals that can cause damage to the liver and increase the risk of cancer. According to the Associated Press, “Even the island’s own water authority has distributed water from some wells at the Dorado Superfund site.” Puerto Rico, an island 100 miles across and 40 miles north to south, contains 18 Superfund sites, likely the result of the US pharmaceuticals companies that took advantage of tax-free policies and US Navy bombings.

The EPA is asking residents to avoid using the wells in the western portion of the site. Erik Olson, the Health Program Director for the Natural Resources Defense Council in an email to CNN wrote, “It is irresponsible to not make every effort humanly possible to find and provide safe drinking water as soon as possible.” Academi, the private security firm headed by Betsy DeVos’s brother—you may remember it as Blackwater, from when four guards were found guilty in 2007 of the shooting of over 30 Iraqis—has received requests to send employees to the island to protect fuel and water distribution. The New York Postwrites that armed mercenaries now roam the streets and local leaders seek to regulate their presence and behavior.

According toThe Hill, unemployment is close to 100 percent. Since October 4th, less than two weeks ago, 30,000 have left the island. Of 1,113 schools in Puerto Rico, NPR reportsthat only 200 have reopened. Students have already lost 35 to 40 days of school, according to Julia Keleher, the island’s secretary of education. In many cases, students are traveling stateside, often on their own, and staying with relatives to attend school. In the case of the children covered in this report, it wasn’t the federal government that helped, but the company of the husband of the family taking them in.

US politicians, particularly Democrats, are trying to mobilize those coming to the mainland as potential voters. Meanwhile, Trump begrudgingly provides as little rebuilding support as possible while complaining that he should not have to and blaming Puerto Ricans for being the cause of their own problems, debt, and failing infrastructure. It’s as if the fact that US companies have benefitted from the tax haven and market that is Puerto Rico—if the island were an independent country, it would be the United States’ fifth-largest market—does not figure into the account.

But this is how domination works: a removal from history and a reversal of facts. In spite of high poverty, Puerto Rico has a literacy rate of 94 percent; an island of just over three million awards 50,000 college degrees a year. With 97 percent of these graduates currently unable to find employment on the island, The Hill concludes that what Puerto Rico needs is a business plan that starts at zero—that is, with no debt, from scratch (right now, Puerto Rico’s debt totals $74 billion). By now, we can conclude that this isn’t something that the US federal government or its agencies will support.

In this political leadership vacuum, nonprofits, private companies and individuals are taking the lead. We saw this script play out before with Katrina. At the time, we thought this was an exception to the rule. Now it is beginning to look like the new normal, only this time, unlike with Katrina, the scenario of an absent federal response is playing out without 24-hour coverage. In short, it seems it’s not just Puerto Rico’s infrastructure that is collapsing, but the legitimacy of the US government. We may want to pay attention and learn; one day, this may hit even closer to home.—Cyndi Suarez

]]>Wed, 18 Oct 2017 20:08:17 GMTNational Council of Nonprofits Statement on the Universal Charitable Deduction Act (H.R. 3988)http://arizonanonprofits.org/news/news.asp?id=369817
http://arizonanonprofits.org/news/news.asp?id=369817Washington, DC - In response to the introduction by Representative Mark Walker (R-NC) of the Universal Charitable Deduction Act (H.R. 3988), Tim Delaney, President and CEO of the National Council of Nonprofits, made the following statement:

“The nonprofit community was pleasantly surprised by the introduction of the Universal Charitable Deduction Act(H.R. 3988), a bill that would extend to all taxpayers a tax deduction for donations to the work of charitable nonprofits. Representative Walker’s bill is a clear effort to provide a solution to our communities for a problem created by the tax reform framework released in late September by Republican leaders in Congress and the Administration.

“The National Council of Nonprofits and many organizations across the country have expressed grave concern that proposals in the tax reform framework, without improvements, would have the effect of reducing giving to charitable organizations doing work in local communities. The framework calls for retaining the itemized deduction for charitable donations, but seeks to nearly double the standard deduction, effectively shutting out 95 percent of Americans from this vital incentive to give. Experts calculate that the approach in the framework could result in a drop in giving by anywhere from $13 billion to $26 billion per year.

“When the framework was released, the National Council of Nonprofits stated: ‘Tax reform needs to enhance, not undermine, the ability of organizations to serve.’ We went on to state, 'That means promoting greater incentives for giving to nonprofit work in communities, such as a universal charitable deduction that all Americans can use to support their fellow Americans….’

“Representative Walker’s bill takes an important step toward possibly resolving significant problem that the framework creates; he is to be commended for taking swift and decisive action in support of our communities.

“At this early stage, it is too soon to determine whether the limit on charitable tax deductions included in the Universal Charitable Deduction Act is properly calibrated to promote greater overall giving and whether alternative solutions should be considered. Together – Congress and charitable nonprofits – should quickly identify relevant data and come to a consensus on how best to improve the universal charitable deduction so that all American taxpayers, not just five percent, benefit from the tax incentive for donations designed to make a difference in local communities across the country.”

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About the National Council of Nonprofits

The National Council of Nonprofits (Council of Nonprofits) is a trusted resource and proven advocate for America’s charitable nonprofits. Connecting the policy dots across all levels and branches of governments, the Council of Nonprofits keeps nonprofits informed and empowered to create a positive public policy environment that best supports nonprofits in advancing their missions. Working with and through the nation’s largest network of nonprofits – with 25,000-plus organizational members - we identify emerging trends, share proven practices, and promote solutions that benefit charitable nonprofits and the communities they serve. Learn more at www.councilofnonprofits.org.

]]>Thu, 12 Oct 2017 15:18:25 GMTAmerica’s Child Poverty Rate Hits Record Low: This Is Not a Typohttp://arizonanonprofits.org/news/news.asp?id=369166
http://arizonanonprofits.org/news/news.asp?id=369166America’s Child Poverty Rate Hits Record Low: This Is Not a TypoSteve Dubb | Oct. 05, 2017
Click Here for the original article from Nonprofit Quarterly

We all know the script. Famously, one of President Ronald Reagan’s favorite lines was, “We fought a war on poverty, and poverty won.” And yet, happily, the data tell us a very different story. To be sure, the United States still has far too much poverty and a higher poverty rate than every other country of similar wealth in the world, but poverty in the United States, especially childhood poverty, is nonetheless falling. In times when so many things seem out of kilter, it is good to step back and realize that the country is making progress in some areas.

According to a report authored by Isaac Shapiro and Danilo Trisi of the Center on Budget and Policy Priorities, which was released this week, child poverty hit a record low of 15.6 percent in 2016. This number is down from 18.1 percent in 2012 (Great Recession peak) and from 28.4 percent in 1967. In other words, the child poverty rate has fallen almost in half since the “War on Poverty” began. As the report’s authors note, “Some 9.5 million fewer children are poor today than would be if the poverty rate had remained unchanged.”

So maybe once in a while, rather than look at what isn’t working, we should look at what is working and how we can work with those points of leverage to get even more positive results. Such an approach, known as appreciative inquiry, was developed by David Cooperrider and Suresh Srivastva of the Weatherhead School of Management at Case Western Reserve University in Cleveland back in the 1980s. As the Center for Appreciative Inquiry explains:

Appreciative Inquiry is a way of being and seeing. It is both a worldview and a process for facilitating positive change in human systems, e.g., organizations, groups, and communities. Its assumption is simple: Every human system has something that works right–things that give it life when it is vital, effective, and successful. AI begins by identifying this positive core and connecting to it in ways the heighten energy, sharpen vision, and inspire action for change.

Applying this appreciative inquiry approach, we might ask ourselves: What is it that enabled our country to lift 9.5 million children out of poverty? And is there anything we can learn from that experience that might help us lift another 9.5 million children out of poverty?

One factor that affects the presence of childhood poverty, of course, is the economy. So, a primary driver of the recent decline in poverty is an improving economy. However, an improving economy is not the primary driver of the longer-term decline. “In fact,” notes Anne Lowrey of the Atlantic, “stagnating wages, reduced bargaining power, automation, and offshoring have held down the earnings of families in the bottom of the income spectrum, and spiraling income inequality has meant that most of the gains of economic growth have gone to families at the top.”

As Lowrey points out, if you don’t account for government policies, “the rate has barely budged since the late 1960s, going from 27.4 percent in 1967 to 25.1 percent in 2016.” But government anti-poverty policies have made a big difference. “All in all, the government’s policies moved 38 percent of kids who would otherwise be poor above the poverty line in 2016,” writes Lowrey.

“It’s striking to see how much the strength of the safety net has increased over time,” says Trisi, one of the coauthors of the report. “That’s very good news.”

What were the key programs? The researchers identify three that are of particular importance. Two of these—the earned income tax credit and the child care tax credit—are refundable tax credits that involve cash transfers to low-income working Americans. These measures are responsible for lifting 5 of the 9.5 million children out of poverty. The phrase “refundable” is an insider Washington term that means you get a refund check from the government even if you don’t pay income tax. (As Mitt Romney remarked, much to his later regret, during the 2012 presidential election campaign, about 47 percent of Americans do not earn enough to pay income tax. However, many in this group pay significant payroll taxes, which is the money that is being “refunded” by the credit.) A third key program is SNAP (Supplemental Nutrition Assistance Program), formerly known as food stamps, which has “lifted millions of additional children out of poverty.”

Other programs, such as housing assistance and supplemental social security income, have also helped lift children from poverty—as, of course, have health insurance programs, including the Children’s Health Insurance Program, started in the 1990s, and the Affordable Care Act. As of 2016, 95 percent of all US children had health insurance, the highest percentage ever recorded, up from 86 percent in 1997.

“In short,” Shapiro and Trisi write, “child poverty is now at an all-time low while children’s health coverage is at an all-time high.”

Of course, none of this is to deny that poverty robs far too many in the United States of life chances. “Child poverty,” report coauthor Shapiro says, is “still higher than in other, comparably wealthy countries. And even though government programs have expanded, we still do far less to reduce child poverty than other nations.”

Moreover, as Lowrey notes, children of color have triple the poverty of white children. “Poverty,” Lowrey writes, “does not just mean worse grades, missed days of school, and skipped meals….it has profound, long-term effects, in terms of health, educational achievement, earnings, and even mortality.”

It is not news that poverty in the United States remains a major challenge with serious detrimental impacts for people affected. But it is heartening to recognize the millions who have benefitted from antipoverty efforts to date. In short, lowering poverty may be hard and it may require resources, but government resources, properly applied, can—and as the data show, actually do—make a significant difference in millions of people’s lives.—Steve Dubb

]]>Fri, 6 Oct 2017 22:35:20 GMTGrantAdvisor.org, a Site for Reviewing Foundations, and Why All the Cool People Are Using Ithttp://arizonanonprofits.org/news/news.asp?id=368998
http://arizonanonprofits.org/news/news.asp?id=368998GrantAdvisor.org, a Site for Reviewing Foundations, and Why All the Cool People Are Using It

Hi everyone. I’ve been involved with a few awesome projects on the side, and one of those projects has now been launched. No, it is not the puppet show on the importance of general operating funds; that will come later. No, it is not Nonprofit Fight Club, because there is NO Nonprofit Fight Club, so stop asking about Nonprofit Fight Club, OK?

I’m talking about GrantAdvisor.org, a new website that allows all of us to anonymously review foundations. This has been a critical missing piece in the funder-grantee dynamics. Let’s face it, because of power differentials, we nonprofits do not always give honest feedback to foundations. And a common complaint I get from foundations is that they can never tell if we nonprofits are being open and transparent about what they could be doing better. Even when foundations solicit feedback, reassure grantees that they can be truthful, and give us each a basket of mini-muffins and a puppy, it is still difficult for us nonprofits to open up.

Which led to things like the one time I had to write a proposal that required a six-page narrative, ten attachments, including a budget tailored to this funder, and the kicker—a page of labels for the attachments, to be printed out and each label had to be literally cut and pasted onto the ten attachments. It was a grant for $4,000. Eight months later, we got awarded $1,000. Yeah, we should not have even applied, but we were in start-up mode and four-grand was a lot of money. Now, wouldn’t be nice if this funder got some honest feedback from dozens of people that their grantmaking process was so horrible that the agony and frustration created by it threaten tounleash the demon-god Cthulhuupon the world?

Thus, GrantAdvisor.orgwas born. It’s like TripAdvisor or Yelp, but for reviewing foundations. Anyone can provide a review, and when a foundation has five reviews, its profile will go live so everyone can see all the reviews. It’s anonymous, so you can be honest. It’ll help foundations to get no-BS feedback and advice that they might not be able to get otherwise. And it’ll help us nonprofits not waste our time with foundations that have consistently horrible reviews; we have important things to do, like saving the world.

Here are someFAQs. I am on the National Leadership Panel and have been involved with helping to design this project for the past two years. What is really exciting about this is that GrantAdvisor is a joint effort between nonprofits and foundations, as you can tell bythis pageof brilliant, highly-attractive, and modest leaders in the sector. This is a pilot project, and it’s already been going really well, with over 450 reviews written in just a month, 30 foundations going live, 132 foundations with at least one review, and 76 foundations appointing key contacts to provide responses to each review on their profile.

But to make this work, we need everyone in the sector involved:

Nonprofit colleagues: Please go toGrantAdvisor.organd write reviews today if you have worked with foundations. We designed the form to be simple and user-friendly and not take up too much time, knowing how busy you all are. Please share this blog post or GrantAdvisor.org and encourage your networks to write reviews. The more reviews we have on this site, the more useful it will be for all of us.

Foundation colleagues: You may be feeling a little hesitant, but I hope you’ll embrace this tool as a way to get genuine and helpful feedback. Please peruse the site, then send out an email to your grantees asking them to review you on GrantAdvisor. If you encourage them to do it, it’ll make it easier for grantees to do so, and the more reviews you have, the better and more accurate the aggregated feedback will be for you. Also, assign a Key Contact whose job is to regularly check reviews, respond to them, and bring back information to your leadership team. Also, ask other funders to check it out.

Associations of Funders: Many of you have been helping funders to examine power dynamics and be more intentional about getting feedback. Thank you for continuing to do that. Please encourage your funding partners to look into GrantAdvisor as a tool for getting unvarnished truth.

Donors, volunteers, consultants, and other leaders in the sector: Please check out GrantAdvisor and ask the organizations and foundations you work with to get involved. If you’ve worked with foundations before, write reviews.

GrantAdvisor is still in its pilot phase, so there may likely be a glitch here and there. Please test it out and contact admin with any feedback you have about how to make the site better and more helpful to everyone in the field. Right now, marketing efforts are focused on Minnesota and California, but anyone in the US can write reviews, and any foundation with five reviews in any state will go live.

And with that, I am off. The script for this puppet show about the importance of general operating funds is not going to write itself. See you next week. Or sooner…if you know what I mean (wink).

Vu Le's column, Point of Vu, appears monthly in the GuideStar Blog. The preceding is a cross-post of an August 28, 2017, article from his blog, Nonprofit ... And Fearless (formerly Nonprofit with Balls). Vu Le is a writer, speaker, vegan, Pisces, and the executive director of Rainier Valley Corps, a nonprofit in Seattle with the mission of developing and supporting leaders of color to strengthen the capacity of communities-of-color-led nonprofits and foster collaboration between diverse communities to effect systemic change.

Once upon a time, mass shootings in the United States were considered shocking. Today, the ability of such horrors to shock is much diminished, although the deaths and injuries that continue to accumulate are no less tragic for their familiarity.

This week in Las Vegas, at least 59 are dead and 527 are injured because of a mass shooting at the Route 91 Harvest country music festival, according to police reports. We at Nonprofit Quarterly join with so many others in sharing our condolences for all who have had loved ones killed or injured in the massacre.

According to the New York Times, since the mass shooting at the Pulse nightclub in Orlando 16 months ago mass shootings across the country have taken 585 lives and injured 2,156.

Nonprofits are affected by these developments in so many ways. Nonprofits are often among the first responders. Last year in Orlando, the Gay and Lesbian Community Center of Central Florida was “on the scene of the Pulse shooting in the early hours of June 12th.” Others also activated. The LGBTQ advocacy group Equality Florida made a commitment to “honor the victims with action.” This work has included “a safe and healthy schools project to ensure that queer youth are fully supported and included in their school environments” and taking a public stance on gun violence. Proyecto Somos Orlando was formed to coordinate the city’s Latinx “social services sector and raise awareness of the need to provide the victims and their families with high-quality culturally competent assistance.”

Unlike some past mass shootings, no obvious motive has emerged in the investigation of the Las Vegas shooting so far. That said, many have observed that, as in Orlando, and also like Paris’s Le Bataclan shooting in 2015 at an Eagles of Death Metal concert and the bombing at Ariana Grande concert in Manchester last spring, once again music has been selected as a “soft target.” As Spencer Kornhaber writes for the Atlantic:

Sunday’s attack brings it [country music] in line with other subcultures—rock and roller, teenage pop fans, queer Latino partiers—that have been singled out for mass violence. “Soft” targets like concerts can hold appeal for those looking to kill simply because they gather together so many people in one place.

Sunday night’s shooting is an attack on an event during which individuals came together, intrinsically and voluntarily partaking in a community because they have the same favorite song, even if for entirely different reasons. It’s something that transcends the politics of the musician (and, sometimes, of their fans), the genre of their music, or the makeup of its fan base—all of which differ radically among Grande, Aldean, and the members of the Eagles of Death Metal and their fans.

Music, beyond providing entertainment, binds people together—not just literally at concert venues, but by creating a common sense of community and belonging. When describing music fans, the term “subculture” is used for a reason: Music fans often do form common identities and build bonds with each other. It is not just the physical proximity that the shooters are attacking; they are seeking to rip apart our sense of social solidarity as well.

Of course, one way the nonprofit sector might respond to the mounting pattern of mass shootings is through advocacy on gun control. The data, after all, are pretty clear that there is a strong correlation between lax gun control laws and more deaths from firearms. It would be laudable if more nonprofits took this issue on, as well as other potential partial solutions such as better mental health services, more funding for trauma centers, and improved security at event venues.

But something much deeper is at work, too. Here at Nonprofit Quarterly, we seek, in collaboration with our community partners, to be a “news voice for civil society.” Clearly, mass shootings, by disrupting our sense of safety, can sow wariness and mistrust of our fellow human beings. Yet social trust is the bedrock of any strong notion of a highly functioning civil society. One way of thinking of our sector’s role is that we are in the social trust building business. In today’s climate, our work is cut out for us.—Steve Dubb

Over the past year, the Skoll, Draper Richards Kaplan, Ford, and Porticus Foundations, working with Rockefeller Philanthropy Advisors, have partnered to investigate how to more effectively apply their resources toward large societal problems like education, racism, poverty, healthcare, and hunger. The conclusion they came to is that their grantmaking practices may have been all wrong.

Adva Saldinger, reporting for Devex, described the impetus behind their effort. “Foundations talk about wanting to help catalyze systems change and scale solutions, but too often their structures, the way they fund, and their relationship with grantees make those goals a challenge.”

A year of study has underscored that knowledge, skill, and wisdom do not lie solely in the hands of foundation staff. The organizations they fund know their business well and are invested in finding ways to do their work more effectively:

Many funders have their own objectives, theories of change, and goals. But rather than selecting grantees that help them achieve those goals, then allowing them to do their work in ways grantees believe will be most effective, funders often pressure grantees to change their programs and activities to align with their own priorities and needs. Interviewees were clear about how much more effective they are when the alignment happens at the strategic goal level, and the more detailed planning is left with the grantee.

For nonprofits to share their knowledge assertively, they need a degree of fiscal stability that current funding practices do not provide. According to Edwin Ou, the director of funder alliances at the Skoll Foundation, being “caught in short-term cycles does not allow [nonprofits] to think, plan, or execute for the long term.” That’s necessary for expansion or systemic change to occur. Foundations would be smarter to provide multiyear, unrestricted funding so their grantees can take risks and speak their minds.

Many of the conclusions reflect the ongoing challenges for boards and staff of keeping nonprofits afloat. Funders often believe they have a depth of business and technical skill and expertise that those they fund lack but desperately need. From the perspective of busy, stressed nonprofit organizations, much of the non-monetary organizational help that’s offered (or imposed) by funders becomes a burden they feel unable to refuse. It is not shocking that, after a year of listening, what they heard from those with whom they spoke was that this “wisdom” is often more harmful than helpful.

Funders…look to leverage their networks, connections, and expertise to further benefit their grantees…As one interviewee described, “Funders push advice and opportunities rather than pull advice and opportunities.” Changing the dynamic about how funding is provided needs to be supported by changing the working relationship.

The report recommends more open dialogue and discussion before a funder imposes a set of practices on its grantees.

The large, societal issues where foundations most wish to have an impact require changes that move from situational to systemic. Foundations can affect those with power and influence in ways unavailable to the organizations they support.

Powerful and influential system actors typically regard funders differently than grantees. Funders often have more access to influential actors through events, organizational processes, and peer networks. Funders can take advantage of their proximity to them to support the work of grantees.

Finding ways to provide “greater support for organizations enabling systems change who may be doing less direct service work, and therefore aiming for longer-term, less metric-friendly outcomes and impact” may become necessary.

The report sees a need to cut the overhead of seeking funding so nonprofits can focus more on their work and less on fundraising: “To scale and shift systems, organizations have no choice but to put more effort into building relationships, mobilizing, and facilitating change—and less into feeding funders information.” It recommends that funders collaborate more effectively so there’s less need for nonprofits to produce the same information separately for each funder. It also recommends individual foundations reduce the burden of how one asks for funds and then, if granted, how an organization reports back.

NPQ has noticed this shift in thinking occurring around us, and would pose a consideration on the other side: Under these rules, what happens to access for smaller, less well known groups?

The publication of this report is like a tree falling in the forest. How loud its sound depends on if there is anyone who is there to hear it or discuss it: “The real work starts now, as we delve more deeply into how we can reach a wider circle of funders who are committed to both adapting their own behavior, and serving as examples for the broader community in the months and years to come.” It will be interesting to see which foundations will come to table to expand this effort.—Martin Levine